Designed to provide broad exposure to the Consumer Staples ETFs category of the market, the First Trust NASDAQ Food & Beverage ETF (FTXG) is a smart beta exchange traded fund launched on 09/20/2016.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $893.45 million, making it one of the average sized ETFs in the Consumer Staples ETFs. Before fees and expenses, FTXG seeks to match the performance of the Nasdaq US Smart Food & Beverage Index.
The Nasdaq US Smart Food & Beverage Index is a modified factor weighted index, designed to provide exposure to US companies within the food and beverage industry.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for FTXG are 0.60%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.57%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
This ETF has heaviest allocation in the Consumer Staples sector - about 95.70% of the portfolio.